Cantillon

Inside the world of business

T-bill auction could separate the Irish from the PIGS

THE DETAIL to watch in the results of today’s auction of treasury bills, which aims to raise €500 million in three-month borrowing, will be the yield or interest rate the State has to pay on the debt, how this compares with other sovereign states and where the lenders or purchasers of the bills are from.

Much fanfare was made earlier this year when the National Treasury Management Agency “top-sliced” or pushed out €3.5 billion of the €11.8 billion Government bond due to be repaid on January 2014 until the following year. This reduced the height of the first major debt repayment hurdle facing the State after the EU-IMF bailout programme expires at the end of next year.

But it transpired that most of those swapping debt out by a year were Irish banks that are either virtually or partially owned by the Government so it was hardly a ringing endorsement of Ireland’s economic prospects by the international investment community. It will be interesting to see how the rate on the new Irish T-bills will compare with the rates of our porcine colleagues, Portugal, Italy, Greece and Spain.

T-bill auctions are pretty low-risk borrowing. Portugal raised €1 billion in 18-month T-bills in April at a rate of 4.5 per cent after it accepted an international bailout. Even Greece auctioned T-bills as the country was embroiled in political chaos in May.

The Irish auction is a precursor to a sale of a much bigger bond with a longer repayment duration that is required by the Government later this year if the State is to have any hope of raising loans to meet more than €30 billion of repayments and funding requirements in 2014 and 2015 and avoiding a second bailout.

It’s certainly a case of dipping a toe in the water before a head-long dive. Prior to last week’s European policy shift towards splitting sovereign and banking debt in this crisis, some would have seen it as dipping a toe in bubbling lava.

Quote of the day

Clearly there were mistakes. Clearly there was behaviour that was reprehensible.

– Former Barclays Bank chief executive Bob Diamond testifying before the UK Treasury Select Committee

Today

The European Central Bank’s governing council meets today with expectations growing that it will lower benchmark rates across the euro zone

Online

You can get the latest news each business day at irishtimes.com/business or by following us on Twitter at twitter.com/IrishTimesBiz.

We also have a Facebook page at facebook.com/IrishTimesBizwhere you can read the latest business headlines, blog posts and reader polls.

Video kills Quinns' starring defence against IBRC claims

THE DRAMATIC appearance of a video apparently showing Seán Quinn junior and his cousin, Peter Darragh Quinn, discussing their asset-stripping activities with people in a Ukrainian restaurant earlier this year, is a development that must have created great concern within the Quinn family camp for all sorts of reasons.

The two young men looking for a “box” (presumably a bank cash deposit box) in which to hold $100,000 which they are anxious not to bring back to Ireland lest the airport be filled with reporters waiting for their arrival, belongs in a film script from the In Bruges genre.